25 Nov 2015

Home loans are changing with the times. You can now get home loans in a variety of different forms, all with different facilities and features. Deciding which home loan suits your needs can be quite daunting and that’s where sound advice from your professional credit adviser can be invaluable. We’re here to help you sort through all the different home loan options and help you choose the one that’s right for you. But where do you start? What features do you need to consider?

Choosing the right home loan

Before you start shopping for a home loan, why not sit down and discuss your personal circumstances, financial situation and goals with us? Once we identify what’s important to you, it will be easier to decide what features and facilities you might need from your home loan

While the first question some clients ask us is ‘what is the best interest rate I can get?’, choosing your home loan isn’t just a matter of picking the one that has the lowest interest rate. The home loan with the lowest interest rate isn’t always the least expensive option when you take into consideration fees, charges and some of the advantages you might get from a loan with features that better suit your needs. These may include:

The ability to make additional repayments

Interest only options

Lump sum repayments

Offset account

Transaction account/credit card facilities

Redraw option

Split loan option.

Two common facilities that could help you save money on your home loan include transaction or savings offset accounts and redraw facilities. We get quite a few questions about these features, so let’s have a look at these in a bit more detail below.

Transaction or savings offset accounts

One of the newer and increasingly popular financial products on the home loan market is a transaction or savings offset account and most lenders have one on offer. Whilst they may not come with the lowest interest rate on the market compared to your basic home loan product, they may help you to save money on how much interest you have to pay and may also help you to save on bank fees you would usually pay for your transaction account and credit card.

A transaction or savings offset account can be used like an everyday bank account, but it is linked to your home loan so that the money you have in it reduces the amount of interest you have to pay on your home loan. In other words, the money in your offset account counts against the amount you owe on your home loan – so the more money you have in there, the less interest you have to pay on your home loan!

You use the account like you would your ordinary transaction account – your salary is paid into the account and your spending comes out of it. With good budgeting, you can really make it work to reduce your interest obligation and help you pay off your home loan sooner. This kind of account can also help you save money on overall banking fees as they usually offer fee free use of ATMs, credit cards and more.

Redraw facilities

A home loan with redraw facilities is a popular choice for many home buyers. It allows you to make extra repayments and gives you the option of withdrawing those extra repayments at a later date if you need the funds.

Usually redraw facilities are only available with variable interest rate loans, as other types of home loans like fixed interest rate home loans or basic home loans do not give you the option of making extra repayments.

Every extra repayment you make to your home loan goes toward reducing your term and therefore the amount of interest you will need to repay over the entire life of the loan. If you make extra repayments diligently every month or even every fortnight, you could save years on your mortgage term and thousands of dollars in interest over time. Even an extra $50 a fortnight could have a dramatic affect!

However, redraw facilities give you a safety net in the event that you should ever need to access the funds quickly. A home loan with redraw facilities can give you almost instant access to your money when you need it – say your fridge goes on the blink or your car needs some major repairs, you’ll know you can get at your money right away.

What type of home loan is right for me?

There’s a home loan type available for just about any property purchase. If you want a home loan with a low interest rate and no redraw or offset facilities, credit card or transaction account then a basic variable rate home loan may be the right choice for you.

However, if you need to make sure that your home loan repayments will stay the same every month for the foreseeable future then a fixed rate home loan may be your best option.

Variable rate home loans usually come with the best range of features and although your interest rate may go up or down, you can make savings on your home loan by using the features wisely. It’s also possible in many cases to arrange a split home loan, which allows you to hedge your bets on interest rate rises by having part of the loan at a fixed interest rate and part on a variable interest rate.

As mentioned earlier, the first step in choosing a home loan is to talk with us about your personal circumstances, financial situation and goals. Getting to know you and how you will use your home loan will help us to guide you through the maze of choices when it comes to selecting your home loan. If you’d like to find out more, or just chat about your plans, please do not hesitate to give us a call. We’re here to help you get started.

We hope you are enjoying the beautiful spring weather and backed the winner on the Melbourne Cup last week! It’s hard to get down to business with so many festivities going on – but spring is traditionally the busiest time of year in property markets around the country and this year is no exception!

Many analysts were predicting a rate cut in November, however the Reserve Bank of Australia (RBA) have elected to keep the official cash rate on hold at 2.0 per cent for another month.

This is the sixth month in a row that the RBA has kept rates on hold after cutting rates to historically low levels in February and May this year. This extended period of stability on interest rates is having a positive effect on our economy, with the Australian dollar mostly holding at a more acceptable level and boosting our tourism and export markets. Employment is also growing and consumer spending is improving.

Home loan interest rates have been on the move during October, despite the RBA keeping the cash rate on hold. These interest rate movements were initiated by the big four banks largely to protect their shareholder’s interests, with rate rises following from many other lenders.

The rapid rises in home values that we have been seeing in Melbourne and Sydney are finally starting to slow in response to the upward movement in rates and the changes in investor lending regulations by APRA coming into effect over the last six months. This is good news if you’ve been struggling to get your deposit together for your first home or a property investment.

Home values in Sydney only increased by 0.28 per cent during October. Melbourne home values increased by 0.64 per cent and Brisbane/Gold Coast improved by 0.16 per cent. In Adelaide home values rose by 1.47 per cent, in Canberra they rose by 1.48 per cent and in Hobart 1.44 per cent.

Only Perth and Darwin showed declines. Home values in Perth fell by 2.76 per cent in October and by a marginal 0.13 per cent in Darwin.

The number of properties on the market is currently quite high – as is to be expected for this time of year. Auction numbers were up in most states last month, however it should be noted that private sales are now becoming more popular than auctions in Western Australia and the Northern Territory. Auction clearance rates were down across the board, indicating that there may be less competition and buyers may be more discerning about property prices.

The table below shows the relevant auction numbers for each state and corresponding clearance rates, for the week ending Sunday 1 November:

STATE

No. of AUCTIONS

CLEARANCE

Victoria

611

65%

New South Wales

1361

64%

Queensland

186

58%

South Australia

146

58%

Western Australia

49

56%

Northern Territory

5

67%

ACT

130

69%

Tasmania

10

33%

If your bank increased your home loan interest rate last month, then it may be a good time to give us a call to get a home loan health check. Not all lenders have increased their rates, and some have increased them less than others, so we can shop around to get the right deal for you. We can also access some great rates for property investors and first home buyers, so if you’d like to check what home loan options are available for you then please don’t hesitate to give us a call today.

The information provided in this newsletter is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs. Information sources: Auction results: www.realestate.com.au Home values: www.corelogic.com.au